US blacklists Xiaomi in widening assault on China tech

Update: Xiaomi statement

"The Company has been in compliance with law and operating in compliance with the relevant laws and regulations of jurisdictions where it conducts its businesses. The Company reiterates that it provides products and services for civilian and commercial use. The Company confirms that it is not owned, controlled or affiliated with the Chinese military, and is not a “Communist Chinese Military Company” defined under the NDAA. The Company will take appropriate course of actions to protect the interests of the Company and its shareholders. The Company is reviewing the potential consequences of this to develop a fuller understanding of its impact on the Group. The Company will make further announcements as and when appropriate," a Xiaomi spokesperson said.

Original story

Xiaomi Corp. plunged more than 11% after the Trump Administration blacklisted the Chinese smartphone maker and 10 other companies, broadening efforts to undercut the expansion of the country’s technology sector.

The U.S. has targeted scores of Chinese companies for the stated purpose of protecting national security, but going after Xiaomi is a surprise. The Beijing-based company has been viewed as China’s answer to Apple Inc., producing sleek smartphones that draw rabid fans with each new release. It also makes electric scooters, earphones and smart rice cookers.

Xiaomi was co-founded by billionaire entrepreneur Lei Jun about 10 years ago, with U.S. chipmaker Qualcomm Inc. as one of the earliest investors. A spokesperson for Xiaomi had no immediate comment.

The Trump administration’s blacklistings have focused on Chinese companies with military ties and strategic value to the industry’s growth. Semiconductor Manufacturing International Corp., China’s largest chipmaker and critical to the country’s ability to build a self-sufficient tech industry, was included in December.

The Company is reviewing the potential consequences of this to develop a fuller understanding of its impact on the Group. The Company will make further announcements as and when appropriate.”

The news was “really surprising to me,” said Kevin Chen, a Hong Kong-based analyst at China Merchants Securities Co. But the blacklisting will hurt sentiment more than the company’s fundamentals, and the stock decline could be short-lived, he added.

In the latest actions, the Defense and Commerce departments released new targets just hours apart, in the waning days of Donald Trump’s presidency. In the Defense list of nine companies, Xiaomi is joined by lower profile firms, including Luokong Technology Corp., Gowin Semiconductor Corp. and Global Tone Communication Technology Co. Advanced Micro-Fabrication Equipment Inc. is publicly traded in the mainland.

The Defense move identifying companies as having ties to the Chinese military means American investors will be prohibited from buying their securities.

The Commerce Dept.’s blacklisting is more severe and prohibits American firms from supplying those entities. Companies identified as threats are China National Offshore Oil Corp., the nation’s main deepwater explorer, and Skyrizon, which develops military equipment.

Xiaomi surpassed Apple in smartphone sales in the third quarter, according to the International Data Corporation. It joined Hong Kong’s Hang Seng Index in September after grabbing market share from Huawei Technologies Co. as U.S. sanctions on Huawei deepened.